The franchise contract requires the franchisee to contribute 1.5 percent of gros

Question

The franchise contract requires the franchisee to contribute 1.5 percent of gross revenue to a national advertising campagin. according to the contract pipe dreams will finance the required fixtures for the store for ten years . in addition the franchiser supplies all the inventory at very favorable prices because it purchases in large quantities. ralph knows he can buy tobacco products from a variety of wholesalers he also has some ideas on what would make a tobacco shop successful in his town ralph knows that pipe dreams franchisees have had a high success rate in the past. assuming ralph has adequate capital would you recommend that he invest in the franchise or open his own tabacco shop why?

Explanation / Answer

Ralph should go for franchise option because it has had a high success rate in past and since he has not a good experience in business then opening his own shop might not be a good idea. He can start with franchise option and later in future when he learns the business completely , he can think about opening his own shop.

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